12 October 2022

EFRAG to sign cooperation agreement with TNFD

EFRAG is expected to sign a cooperation agreement with the Taskforce on Nature-related Financial Disclosures (TNFD) and has engaged in "informal discussions" to align ESRS E4 on biodiversity with the TNFD framework, EFRAG sustainability reporting board (SRB) members heard at a meeting today (12 October).

Philippe Diaz, a member of the EFRAG Sustainability Reporting Technical Expert Group (SR TEG), presented the TEG's suggested modifications to ESRS E4, in line with comments received during the public consultation, to the board.

Diaz said the SR TEG had engaged in discussions with the TNFD only on an informal basis because a cooperation agreement wasn't yet in place but was in the pipeline.

"What I can say about ESRS E4 is we are taking into account [TNFD's] feedback that they have confidentially provided to us," Diaz said. "And the LEAP framework introduced in the [TNFD] draft framework 0.2 has also been considered. I have spent a lot of time redrafting the application requirements on how the materiality assessment [in ESRS E4] is being done and this is now largely, in terms of sequence, compatible with TNFD."

EFRAG SR TEG is aligning with the TNFD work as much as it can as the taskforce's work on a final framework is ongoing, Diaz continued. "We know the LEAP framework will remain stable although there is a lot of other work that will come on top of the LEAP framework, but [we can now] align with the LEAP framework because it won't be changed."

The TNFD is expected to release some papers on proposed metrics at the UN Biodiversity Conference in December in Montreal and an updated framework next year. Diaz said: "We can't align with what is not public yet, hence we have a few indicators in ESRS E4 and we are sticking to a principle-based approach and in the future iteration of the standard, we will have to take TNFD, the global baseline, more into account."